Britain’s retail sector could be hit by a 20% rise in costs after Brexit – while car makers could see a 13% rise in manufacturing costs outside the EU – according to the Government’s own internal estimates, seen by Sky News.
The forecast impact of Brexit on every industrial sector of the economy reveals the estimated added costs to UK companies.
So-called non-tariff barriers as a result of leaving the EU have also been calculated to add as much as 16% in costs in the food, drink, defence and education sectors.
The estimates are from the same document as an earlier leak of the forecast economic impact on the UK’s nations and regions.
The analysis has been prepared by Government economists for Cabinet ministers, ahead of their discussions on future trading relationships with the EU, to be held on Thursday.
The estimated impact of Brexit on the UK’s industrial sectors are what drive the eye-watering hits to growth over the next decade-and-a-half that have been forecast in certain parts of the country.
They are calculated from the estimated effect of non-tariff barrier costs on British businesses, which will be introduced to UK-EU trade upon withdrawal from the bloc.
Those costs have been expressed in percentage terms as if they were a regular tariff on trade.
The non-tariff barriers include extra customs checks, rules of origin regulations, added paperwork, and diverging regulatory standards.
Essentially, they are a calculation of the “friction” that will be introduced to trade across almost all UK industrial sectors.
The Government no longer promises that post-Brexit trade with the EU – the UK’s biggest market – will be “frictionless” after Brexit, instead claiming it will be “as frictionless as possible”.
The document, circulated to members of the key Cabinet subcommittee due to meet on Thursday, estimates the range of potential non-tariff costs in key industrial sectors.
There will be the equivalent of a rise in costs of at least 2% – but as much as 6% – in the machinery equipment and energy sector.
In the chemical, rubber and plastic sectors the increase in costs is between six and 12%. Other manufacturing is forecast to see a rise in costs of between five and 12%.
The motor vehicle sector is facing non-tariff barriers worth between five and 13% of output. The food and drink sector between eight and 16%.
Agriculture could be hit by extra costs of between eight and 17%, although that could be mitigated by changing regulations and free trade deals with new markets.
Financial services face barriers the equivalent of between five and 10% in added costs, other services from two to 10%.
Construction and business services are calculated to be relatively little affected, by 0% or zero to 6%.
In response to the leaked analysis, a Government spokesperson said: “This document does not represent Government policy and does not consider the outcome we are seeking in the negotiations.
“As Ministers clearly set out in the House of Commons, this is provisional internal analysis, part of a broad ongoing programme of analysis, and further work is in progress.
“We are seeking an unprecedented, comprehensive and ambitious economic partnership – one that works for all parts of the UK. We are not expecting a no deal scenario.”